RBI announces green bonds, to be auctioned in 2 parts of Rs 8,000 cr each

The proceeds from the bonds will be deployed in public sector projects which help in reducing the carbon intensity of the economy, said RBI

The Reserve Bank of India (RBI) on Friday announced that it will be issuing Sovereign Green Bonds (SGrBs), which will aim at mobilising resources for green infrastructure. In line with the country's target to reduce carbon emissions, the RBI will auction SGrBs of Rs 16,000 crore in two tranches of Rs 8,000 crore each in January and February, the central bank said in a notification.

The RBI will auction 5-year and 10-year green bonds worth Rs 4,000 crore each on 25 January and on 9 February, and this would be a uniform price auction, the central bank said.

According to the central bank, the proceeds from the bonds will be used in public sector projects which help in reducing the carbon intensity of the economy.

“The Reserve Bank of India, in consultation with the Government of India, has decided to notify the indicative calendar for issuance of SGrBs for the fiscal year 2022-23," the RBI notification read.

The features of the SGrBs issuace will be as follows:

• SGrBs will be issued through Uniform Price Auction
• Five per cent of the notified amount of sale will be reserved for retail investors as specified under the ‘Scheme for Non-competitive Bidding Facility in the auction of Government of India Dated Securities and Treasury Bills’
• SGrBs will be eligible for repurchase transactions (Repo) according to the terms and conditions mentioned in Repurchase Transactions (Repo) (Reserve Bank) Directions, 2018 as amended from time to time
• SGrBs will be reckoned as an eligible investment for SLR purposes
• The underwriting in the auction of SGrBs by the primary dealers will be as per the “Revised Scheme of Underwriting Commitment and Liquidity Support" issued by the Reserve Bank
• SGrBs will be eligible for “When Issued" trading in accordance with the guidelines on ‘Transactions in the When Issued market in Central Government Securities’ issued by the Reserve Bank of India vide circular dated July 24, 2018, as amended from time to time
• SGrBs will be eligible for trading in the secondary market
• SGrBs will be designated as specified securities under the ‘Fully Accessible Route’ for investment in Government Securities by non-residents

What are Green Bonds?

Green bonds are financial products that the government uses to produce the necessary funding from potential investors for programmes/ schemes that promote environmental sustainability and climate adaptation.